METALS MORNING VIEW 29/03: Prices getting some lift - book squaring or start of a rebound?

Base metals prices on the London Metal Exchange are for the most part stronger today, Thursday March 29, with prices up by an average of 0.6%. Nickel leads the advance with a 2% rise to $13,300 per tonne, while copper is up by 1% at $6,732 per tonne.

Volume has been high with 12,789 lots traded as of 07.56am London time.

This morning's strength builds on recent consolidation, with most of the metals now undergoing rebounds, the exception still being aluminium.

In precious metals, gold, silver and platinum prices are weaker by an average of 0.2%, while palladium is up by 0.2%. Gold prices were recently quoted at $1,323.26 per oz. Yesterday was a down day for the complex, with prices falling an average of 1%.

On the Shanghai Futures Exchange this morning, base metals prices are for the most part firmer with gains of 0.9% for copper and nickel, 0.5% for lead and 0.3% for aluminium, while zinc prices are off by 0.1% and tin is little changed. Copper prices for the May contract were recently quoted at 49,920 yuan ($7,940) per tonne, while spot copper prices in Changjiang are also up by 0.9% at 49,470-49,730 yuan per tonne. The LME/Shanghai copper arbitrage ratio has eased to 7.42, from 7.47 on Wednesday.

In other metals in China, iron ore prices are up by 1% at 441 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are up by 1.1%, while gold and silver prices are down by 1% and 1.6% respectively.

In wider markets, spot Brent crude oil prices are down by 1.3% at $68.91 per barrel and the yield on US 10-year treasuries is little changed at 2.78%, as is the German 10-year bund yield at 0.50%.

Equity markets in Asia are generally firmer this morning: CSI 300 (+1.73%), Kospi (+0.71%) Hang Seng (0.64%), Nikkei (+0.61%), but the ASX 200 is weaker (-0.52%). This follows a mixed performance in western markets on Wednesday, where in the United States the Dow Jones closed down by 0.04% at 23,848.42 (weighed down by the tech sector), while in Europe the Euro Stoxx 50 closed up by 0.43% at 3,331.25.

The dollar index at 90.07 is trying to get some lift after a weaker start to the week - a move above 90.50 would start to look more constructive. The major currencies are on more of a back footing: sterling (1.4056), euro (1.2308), yen (106.55) and Australian dollar (0.7675). The yuan is giving back some of its recent gains, it was recently quoted at 6.2891, having been as strong as 6.2409 on Tuesday. Most of the emerging market currencies we follow are on a back footing, the exception being the ringgit and peso.

The economic calendar is busy ahead of the Easter break. Data out already today showed UK house prices dipping by 0.2%. Later there is data on German preliminary consumer price index (CPI) and German unemployment change. There is also data on UK lending, gross domestic product (GDP), M4 money supply and index of services, along with US data that includes personal spending, income and prices, initial jobless claims, Chicago purchasing managers’ index (PMI), University of Michigan (UoM) consumer sentiment and inflation expectations, and natural gas storage.

Most of the base metals prices are rebounding, the exception is aluminium that remains depressed. The rebounds suggest bases may have formed and if that is the case then the metals look well placed to rally as bargain hunting takes advantage of the recent price weakness. Given the long weekend with the LME closed on Friday and Monday, it may be that the market is just seeing short-covering ahead of the holiday, so we will need to wait to see what the mood is when markets reopen on Tuesday April 3.

Overall, we remain bullish on the outlook for the global economy so we see this correction as temporary and are on the lookout for buying opportunities. The second quarter lies ahead and any let-up in trade tensions may well spark another round of buying from consumers and investors alike.

Gold’s strong rebound is being corrected - it appears that geopolitical tensions over North Korea are easing for now with various summits announced and as trade tensions also appear to ease. Silver is mirroring gold’s move, while platinum and palladium prices have been taking their cue from the recent weakness in industrial metals prices, although prices have yet to turn higher in line with the rebound in base metals.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.